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Former RBI governor Raghuram Rajan has defended the controversial 80:20 gold scheme of 2013-14, saying its liberalisation followed objective criteria and improved supply of gold.

“The whole objective was to bring down the premium that had built-up in the gold trading because of the constraints on supply side. So, liberalisation would have brought down that premium considerably,” Rajan told CNBC-TV18 on Tuesday on the relaxations in the second phase of the scheme which allegedly worked in favour of a few.

Rajan said the commerce ministry went by its objective criteria on star exporters and star trading houses while deciding on who should be allowed to import gold after the permission given to state entities alone initially choked up supply of the precious metal.

Rajan was RBI Governor and P Chidambaram was Union Finance Minister when the 80:20 scheme was implemented. When it was started in 2013, only banks and PSUs like MMTC and STC were allowed to import gold for domestic use. In May 2014, while the UPA government was on its way out, the scheme was modified allowing premier trading houses and star trading houses to import gold, which according to the Comptroller and Auditor General (CAG) resulted in a windfall gain of Rs Rs 4,500 cr for 13 trading houses. The scheme was terminated in November 2014.

In a statement yesterday, the commerce ministry said it will examine the circumstances under which private parties benefited from the nod to import gold under 80:20 scheme by the UPA government when the government was in transition and that it will take necessary action against those involved.

Rajan, in the interview, further said like any constraints that are imposed on a market system, “there would” have been some people who made money and some people who didn’t.

“The people who didn’t make money objected against the people who did make money but the people who made money were objecting against others, this kind of thing keeps going on. Ultimately the idea was to bring back free trading, that’s what happened and that is a good thing,” the former governor said.